TRIPOLI, April 16 (Reuters) - Libya's economy ministerexpects growth of 3 percent this year, driven by a resurgence inoil production achieved despite security so precarious thatgovernment departments like his must be protected by pickuptrucks bristling with weapons.

The OPEC member restored pre-war oil output levels of around1.6 million barrels per day (bpd) faster than expected after the2011 armed uprising that ousted Muammar Gaddafi brought flows toa virtual standstill. The revival of oil production allowedLibya to record economic growth of over 100 percent last year.

"This year is different from 2012. Libya is currentlyproducing 1.5 million bpd. There are other sectors such asindustry and agriculture which sustained damage during thefighting and we hope they can resume properly again soon."

His forecast is more conservative than others. Last year,the International Monetary Fund said Libya's economy was poisedto grow 17 percent in 2013 and should average growth of 7percent annually between 2014 and 2017.

Libya's top oil officials have said they hope to increaseoutput to 1.7 million bpd this year, however they have warned ofthe risk that protests and strikes could interrupt production.

A wave of disruptions, sometimes violent, targeting Libya'spivotal energy sector in the last year meant output was brieflycut several times.

Libya relies on petrodollars from hydrocarbon exports for 95percent of its income. Analysts say it needs to develop theprivate sector, seeing potential for fisheries and tourismeventually, if the government can improve security.

Life has mainly returned to normal with new shops, cafes andrestaurants opening regularly in the capital Tripoli, but thevast North African state remains awash with weapons.

Some 18 months after Gaddafi's death, transitional rulersare struggling to impose their authority on a myriad of armedgroups who often take the law into their own hands - andsometimes storm government buildings.

Speaking at his office on the outskirts of Tripoli - itselfsecured by several pickup trucks mounted with anti-aircraftguns, Abofanas said he was looking at ways to boost the privatesector and help diversify the economy.

"The ministry is looking at privatisation plans for certainindustries; there are projects being studied for small andmedium enterprises," he said. "We are discussing mechanisms forfunds to finance this. We hope to have something by end-April."

In order to reduce Libya's reliance on volatile oilrevenues, Abofonas said his ministry was also looking atboosting exports.

"There are many producers who are interested in exportingdates, olives and olive oil. We are also looking at developingtourism. But it is difficult to give a percentage of how muchthis will represent in terms of Libyan income in the future aswe still need to do our research and this takes time."

"NOT NORMAL SITUATION"

Last month, the national assembly adopted a 2013 budgetworth 66.9 billion dinars ($52.2 billion) - paid for by oilrevenues - in which the authorities plan to scrap food subsidiesand instead hand out cash to families.

Some 20 billion dinars have been dedicated to infrastructureand reconstruction projects; state salaries account for 31percent - more than before - as the state payroll now includestens of thousands of former rebel fighters from the war.

"We are not in a normal situation right now. A lot is goingtowards state salaries, compensation, trying to rebuild what wasdamaged," Abofanas said.

Inflation is around 6 percent, similar to last year's levelswhile unemployment is estimated to be around 15 percent.

"The government is looking at what steps to take to lower(inflation) but things will be clearer next year. It isdifficult to give a (target) figure right now," he said.

Part of an interim administration that will lead the nationtowards a new constitution, Abofonas has a short term plan toreview laws implemented by the previous regime and help rebuildthe country after the conflict.

One sector likely to face change is Libya's banking sector,with the government now working on regulating the industry.

"The government is looking at modernising this sector,"Abofonas said. "It is looking at Islamic banking as well asIslamic insurance. There are conferences scheduled on that."

Other plans include economic decentralisation, especiallycalled for in the eastern city of Benghazi, cradle of the Libyanrevolt. There, residents say they want the country's newconstitution to give the city powers to manage its own affairsand a share of the eastern region's resources.

Abofonas said he had travelled to Benghazi last week wherehe discussed creating a free trade zone with local officials.